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Cartel Stability and the Curvature of Market Demand

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  • Lambertini, Luca

Abstract

The stability of collusion is analysed for a family of demand functions whose curvature is determined by a parameter varying between zero and infinity. When the number of firms is low, firms may prefer to act as quantity setters in order to increase cartel stability if demand is sufficiently convex. Otherwise, price-setting behaviour enhances their ability to collude. As the number of firms tends to infinity, Cournot behaviour is preferable to Bertrand behaviour in order to stabilize collusion, independently of the characteristics of market demand. Copyright 1996 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

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  • Lambertini, Luca, 1996. "Cartel Stability and the Curvature of Market Demand," Bulletin of Economic Research, Wiley Blackwell, vol. 48(4), pages 329-334, October.
    • Handle: RePEc:bla:buecrs:v:48:y:1996:i:4:p:329-34
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    References listed on IDEAS

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    1. Deneckere, R., 1983. "Duopoly supergames with product differentiation," Economics Letters, Elsevier, vol. 11(1-2), pages 37-42.
    2. Majerus, David W., 1988. "Price vs. quantity competition in oligopoly supergames," Economics Letters, Elsevier, vol. 27(3), pages 293-297.
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    Cited by:

    1. Helmuts Azacis & David R Collie, 2018. "Taxation and the sustainability of collusion: ad valorem versus specific taxes," Journal of Economics, Springer, vol. 125(2), pages 173-188, October.
    2. Posada, Pedro, 2000. "Cartel Stability and Product Di¤erentiation: How Much Do the Size of the Cartel and the Size of the Industry Matter?," Economic Research Papers 269307, University of Warwick - Department of Economics.
    3. David Collie, 2004. "Collusion and the elasticity of demand," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-6.
    4. Zimmerman, Paul R., 2010. "On the sustainability of collusion in Bertrand supergames with discrete pricing and nonlinear demand," MPRA Paper 20249, University Library of Munich, Germany.
    5. Connor, John M., 1997. "Archer Daniels Midland: Price Fixer To The World," Staff Papers 28653, Purdue University, Department of Agricultural Economics.
    6. R. Cellini & L. Lambertini, 2000. "Non-Linear Market Demand and Capital Accumulation in A Differential Oligopoly Game," Working Papers 372, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. Lambertini Luca, 2000. "Technology and Cartel Stability under Vertical Differentiation," German Economic Review, De Gruyter, vol. 1(4), pages 421-442, December.
    8. Posada, P., 2000. "Cartel Stability and Product Differentiation: How Much Do the Size of the Cartel and the Size of the Industry Matter?," The Warwick Economics Research Paper Series (TWERPS) 556, University of Warwick, Department of Economics.
    9. David R. Collie, 2006. "Collusion in Differentiated Duopolies with Quadratic Costs," Bulletin of Economic Research, Wiley Blackwell, vol. 58(2), pages 151-159, April.
    10. R. Cellini & L. Lambertini, 2003. "Advertising in a Differential Oligopoly Game," Journal of Optimization Theory and Applications, Springer, vol. 116(1), pages 61-81, January.
    11. L. Lambertini & M. Trombetta, 1997. "Delegation Affect Firms' Ability to Collude," Working Papers 275, Dipartimento Scienze Economiche, Universita' di Bologna.

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